When designing automated exchange systems there is a constant demand for improvements, which increase liquidity, narrows the difference between bid and offer, the so called spread, and reduce the risk exposure for parties involved in the trading of instruments at the automated exchange.
For example, if prices on the market are changing the parties probably want to change their quotes. It is then of great importance that the changes can be made very quickly in order not to expose the parties involved to an unnecessary high risk. If changes can be made quickly the spread can be kept at a minimum and market makers or any other type of trader can accept the risk of placing orders in the order book.
Furthermore, a market maker has an obligation to quote, i.e. to have both a bid and an ask in the market most of the time during trading. When the market moves this obligation results in a requirement on the market maker to send new quotes to the exchange. If the same firm or person (or automatic quoting system) is a market maker in many instruments this will create a problem for the market maker. Hence, when the market moves fast a lot of quotes need to be sent. The result may be that the market maker needs to have a larger spread, i.e. the difference between the bid and the ask, in order to decrease the risk of not being able to re-quote fast enough to an acceptable level.
An efficient matching system should also have functionality to always do a best price available check before an order from a customer is matched. Also the customer order should be sent to another market, if the other market has a better price and the market maker can/do not want to do a price improvement. The International patent application No. PCT/SE99/01995 describes an automatic exchange system where, if an order can not match due to a best price checking functionality in the system, the order can automatically be sent to another exchange, where a better price is available.